Crisis could spell opportunity for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — at least this is what Citigroup thought of the top management changes last week at the world’s biggest contract chipmaker.
Contrary to most analysts’ view that the return of Morris Chang (張忠謀) as chief executive officer would prompt concern over the company’s long-term succession plan, Citigroup said the 78-year-old Chang would help re-energize TSMC, while former CEO Rick Tsai (蔡力行) might have his job back in a few years.
“We see Chang’s return as positive, not negative,” Citigroup analyst Andrew Lu (陸行之) wrote in a client note on Monday. “After earning very good credibility from the market, we believe Tsai might still be able return as CEO within three years.”
Last week, TSMC announced its board of directors had appointed Chang to replace Tsai as CEO and moved the latter to head a new division within the firm developing green energy business. The board retained Chang as chairman, TSMC said in a statement on Thursday.
While Chang last week dismissed speculation that Tsai’s “demotion” had anything to do with employee layoffs over the past few months, many analysts, including Pranab Kumar Sarmah of Daiwa Institute of Research (Hong Kong) Ltd, said this may have been one of the reasons behind the move.
Citigroup nonetheless viewed the layoffs as unavoidable amid the global economic downturn.
“We see the 5 percent layoff as a necessary evil for TSMC and for investors, as sales for 2009 and 2010 are expected to be down between 10 percent and 20 percent from 2008 levels,” Lu said in the note.
As TSMC owes much of its success in the past 20 years to the efforts of its founder, Chang, Citigroup believed his presence could prove equally effective during this transition.
“We believe Chang can rebuild the centripetal force on employees after the recent layoffs,” Lu said. “He was never hands-off on major changes at TSMC in recent years, when Tsai was CEO.”
Tsai was appointed CEO at TSMC in 2005 and has been with the company for 20 years. He is now president of the firm’s New Business Development Organization, which is charged with developing solar cells and light-emitting-diode products.
“Up until now, we just do not know who would be more qualified than Tsai if Chang retired,” Lu said, adding that some senior managers could be reshuffled as well, without elaborating.
Chang is already 78 years old, nearly 20 years older than most CEOs in Taiwan’s high-tech sector. TSMC has a vice chairman, three senior vice presidents and 10 vice presidents at its executive level, the company Web site showed.
Citigroup said Chang could help navigate and push TSMC to increase its competitiveness in wafer manufacturing and other integrated circuit-related services, including at its wafer fabrication plant in China.
Eyeing China’s cheaper labor cost and bigger market potential, TSMC set up an 8-inch fab in Shanghai in 2003, while rival United Microelectronics Corp (UMC, 聯電) owns a 15 percent stake in Chinese chipmaker He Jian Technology (Suzhou) Co (和艦).
But as UMC’s board of directors agreed in April on a proposal to acquire the remaining 85 percent stake in He Jian, industry watchers have viewed the move — if it is successful — as a growing challenge to all chipmakers doing business in China, including TSMC.
“We believe Chang will refocus on the China fab, which was poorly run compared with that at He Jian,” Lu said.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in